Double digit annual house price growth (10.9%) has been driven by continued buyer demand outstripping supply. The imbalance is pointing to further house price growth over the coming months.
While the end to the SDLT holiday meant transaction numbers were lower in April than in March, they were sill 59% above the 2018-20 average. Favourable interest rates have also boosted activity, encouraging many to relocate and upsize to larger homes.
|Initial Rate||Description||Subsequent Rate||Overall Cost For Comparison (APR)||Early Repayment Charge||Max Loan||Fee|
|0.95%||2 Year Fix||34.34%||3.10%||2% Year 1, 1% Year 2||£2m||£1,499|
|0.98%||2 Year Tracker||3.59%||2.60%||0.5% Year 1, 0.25% Year 2||£2m||£995|
|1.12%||5 Year Fix||3.59%||1.70%||5% Year 1, reducing annually to 1% by Year 5||£1m||£1,499|
|1.19%||2 Year Fix – BTL||4.74%||4.30%||1.5% Year 1, 1% Year 2||£1.5m||2% of loan|
With the UK property market booming, many estate agents will not let prospective buyers view properties unless they are in a position to proceed without delay. Clients may want to consider ‘let to buy’ where the existing property is kept as an investment and a capital raising remortgage on the existing property raises the deposit for the new purchase. The mortgage payments do not count as outgoings for affordability purposes on any new application as they will be covered by incoming rent. The end result is being ‘chain free’ and hopefully at the head of the queue for new properties.
Lenders are now returning to 95% lending, enabling first time buyers to get on the property ladder more easily.
Following the detrimental tax changes in the rental sector, many higher rate taxpayers are now purchasing new investment properties in a limited company. This route can offer more favourable tax treatments as all the costs, including mortgage interest can be set against income. Property assets can also be passed down a generation mitigating inheritance tax.
At the June MPC meeting the Monetary Policy Makers voted 9-0 to hold base rate at 0.10% and 8-1 to keep the government bond-buying programme at £875billion. The Bank said inflation would peak at above 3% as Britain’s lock-down economy reopens, but the rise further beyond its 2% target would only be ‘temporary’. The base rate is also not likely to rise for at least two years and it is unlikely that lenders will pass on any further cuts in base rate as they struggle to maintain margin.
Whether you are coming to the end of your mortgage product or keen to compare your current rate to the best available elsewhere, please contact your adviser who can put you in touch with our mortgage partners.
* Lending criteria restrictions apply to all products, always seek independent advice.
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Source: Professional Mortgage Services and Savills.
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